Buy-to-let investors creep back into the market

The number of people investing in property has increased as fears of a house price crash abated, figures showed today.

The Royal Institution of Chartered Surveyors (RICS) said expectations that interest rates had peaked had also tempted some investors back into the market, although the growth was modest compared with that seen between 2001 and 2003.

It added that existing landlords were also now less likely to sell their property when their current rental agreements came to an end compared with previous months.

At the same time the level of rent being paid on residential property rose at its fastest pace for four years, with particularly strong increases in the south west and London, although they remained muted in the south east.

Demand for rented property in England, Scotland and Wales also continued to rise during the three months to the end of July, with flats the most sought after type of property, as potential first-time buyers continued to struggle to get on the housing ladder.

RICS spokesman Jeremy Leaf said: "The return of buy-to-let investors to the market is a result of expectations that interest rates have peaked.

"They may also have been encouraged by the fact that the housing market, though subdued, has not collapsed, despite widespread fears it would do so.

"August's interest rate cut is unlikely to reduce tenant demand as tough affordability means renting remains the only realistic option for many."

The average rent being charged across all properties was £753 a month during July, ranging from around £569 for a one-bedroom flat to £1,229 for a four-bedroom detached house.

The rise in rents boosted the returns being earned by buy-to-let investors for the second quarter in a row.

But investors expect the increase in people entering the market to dampen demand, making them less optimistic about further rises going forward, although rents are unlikely to fall in the short-term while tenant demand remains strong.